Unnoticed Positives in US Consumer Spending

While the European sovereign debt crisis has topped the news of late (which will be causing a down market today as traders digest the impact of last week’s European Union fiscal pact), seemingly unnoticed are the positives. U.S. Consumer spending has been healthier than the consumer mood in recent months, but consumers are finally seeming to accept that the economy is improving, albeit from deeply depressed levels. There are two components to Consumer Sentiment: expectations and current conditions, and both are showing good increases.

The gain in consumer expectations suggests that consumers see improvement for their job prospects and for their income prospects, which is key for acceleration in consumer spending.

Current conditions are also showing improvement but to a lesser extent. Inflation expectations are low despite $100 oil which has yet to inflate prices at the gas pump due to a sizeable supply of refined oil products.

While there has been a disconnect in recent months between strong consumer spending and depressed consumer sentiment, the improvement in the consumer mood can only be a positive toward adding momentum to the recovery.